Case 1 Tesla Motors

CASE ANALYSIS 2
GROUP no.
Members:
Caringal, Phill Joshua
Geocallo, Arjohn
Lyn, Amie
CASE 1: CAN ELON MUSK KEEP TESLA MOTORS RUNNING?

Management: Leading and Collaborating in a Competitive World, 9 th Edition, by Bateman and Snell
A small player in the struggling global auto market, California-based start-up

Tesla Motors is trying to revolutionize its industry. Headed by chief executive Elon
Musk, Tesla has an ambitious vision: to mass produce electric cars that end Americans
dependence on fossil fuels and cut greenhouse gas emissions. The South African-born
Musk, who holds degrees in both physics and finance, predicts that by 2030, the
majority of cars made in the United States will be electric.
A bold prediction?Maybe. But Elon Musk is a skilled manager. By his thirties he
had led two successful internet companies: Zip2 (later sold to Compaq) and X.com
(which morphed into what is now known as PayPal). In 2004, Musk became chairman
of Tesla Motors, a start-up founded the year before by CEO Martin Eberhard. Selfprofessed car geeks, Musk and Eberhard saw a bright future for electric cars. But the
two often disagreed about how to move the company forward. Costs and conflicts
escalated until 2007, when the board of directors ousted Eberhard.
With Tesla at a turning point, Musk helped the company regrouped, introducing
the first model, the all-electric Roadster, in 2008. The two-seat sports car goes from 0
to 60 miles per hour in four seconds and hits a top speed of 135 mph. Powered solely
by a lithium-ion battery, the Roadster operates without engine noise and can travel
nearly 250 miles on a single charge. It also doesnt emit any gases to the
environment.
Despite its substantial $109,000 price tag, the Tesla Roadster sold out almost
immediately. Today, Tesla ships 10 of the cars each week and has a year-long waiting
list.
Like many start-ups, Tesla Motors has hit a few potholes along the way.
Fundamental differences between Musk and Eberhard led to complications that nearly
halted the companys progress. Technical problems during development pushed back
the launch of the companys first car, the Roadster, by more than a year. In turn, the
production delays caused cash flow problems. Yet, to date Tesla has raised nearly
$150 million from investors; $55 million of that come from Elon Musk.
The company burned through three CEOs before Musk took reins in 2008. By
that time, the world economy had taken a serious downturn, and the United States
found itself in a deepening credit crisis. Musk ordered a layoff of nearly 25 percent of
the workforce, closed one office in a Detroit suburb, and opened a smaller one
nearby. Tesla is also looking to its Roadster, now in full production, to enhance the
revenue stream by trimming manufacturing costs.
While Musk is confident Tesla will weather the storm and characterizes the
moves as needed belt-tightening, the recession couldnt have come at a worse time
for the firm. With Elon Musks cost-cutting initiatives, Tesla Motors was able to
withstand its financial crunch. Musk drew on relationships he formed in the computer
industry --- with investors ranging from eBays cofounder to Googles founders to
Silicon Valley venture capitalists --- to help fund Tesla. Meanwhile, the company
focused on filling its backlog of orders for its Roadster sports car to generate needed
cash. Musk says, The reason we started off with a sports car is because initially any
new technologys expensive. Sports cars, even with their hefty price tags, do not
suffer sales slumps the way an average mom-and-pop car would --- buyers still want
the latest technology. But their smaller market limits the growth that Tesla can
expect. To realize his vision of bringing electric cars to the masses, Musk needs to
produce a more mainstream, less expensive model.
QUESTIONS:
1. Consider Elon Musks background in the computer industry and the difficulty of
starting a revolutionary car company. Do you think California is a good place
from which to base Tesla Motors? Why or why not?
Consider Elon Musks background in the computer industry and the
difficulty of starting a revolutionary car company. Do you think California is a
good place from which to base Tesla Motors? Why or why not? Yes. California is
the most populous U.S. state, with 38 million people, and the third largest
state by area just behind Alaska and Texas. The economy of California is the
largest in the United States. As of 2014, California's gross state product (GSP) is
about $2.3 trillion. California has an enormously productive economy, which for
a nation would be one of the ten largest in the world. So there is a really big
opportunity waiting there. The revolutionary cars would stimulate the economy
of California even more. Through retail sales, job opportunities, stocks, and
supporting businesses. It would be a win-win situation. Not to mention the
overall productivity, efficiency, and safety of these revolutionary cars would
also benefit the locals of California since we all know how traffic works there.
It wont take decades before dramatic changes is seen. Just to give some
additional perspective, here are some quotes from Lee Stogner, a business
consultant in the fields of engineering: Youll be seeing more changing in car
technology in the next five years than you have in the past hundred, Stogner
says. The market expects it. Government will demand it. And the market will
bear it."
2. Musk has drawn on his background in both physics and finace to get Tesla off
the ground. But he has also used his managerial skills to keep the company
moving ahead. Which skills has he used?
3. What attributes/characteristics does Elon Musk exhibit that make him an

effective manager?
The ability to lead the company and communicate with his employees
Self-Awareness, in which he was able to stand 3 successful companies
Adaptability
The ability to view other people as Resourceful
To look for people or employees that will share and nurture their
talents and ideas
Precise and purposeful execution and implementation of the strategy
Optimistic
A good and skilled manager should be intelligent upon decision making
and other work-related stuff
He has a constant development throughout the pace of his career
One must be a risk-taker and contains a lot of confidence which will
provide inspiration and the good vibes ambiance upon the workplace.
Hardworking and shows perseverance at all times
4. What management style best describes Musks leadership? Why?

For us, Elon Musk's management style is a Directive Autocrat in which he
makes the decisions unilateral and closely supervises its subordinates. We can
see that the time Musk took control of the whole Tesla Motors Company, he
made some adjustments for which he narrowed down the company's
manufacturing costs and concentrated in building the Roadster sports car. With
this, he uses his ability to adapt in the industry crisis that he was set on a goal
that the company should withstand on its own and surviving and defeating the
problem. With his capabilities and intelligence the Tesla Motors Company was
able to surpass and withstand on its financial crunch. They gathered big
investors that can support the company all throughout. Fortunately, the
Roadster sports car became a hit but the idea of the electric car should not end
on that, but Musk and his Tesla Motors Company will produce and invent a more
mainstream and less expensive model that can certainly help our society grow
and progress.

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CASE ANALYSIS 2

CASE 1: CAN ELON MUSK KEEP TESLA MOTORS RUNNING?

A small player in the struggling global auto market, California-based start-up

3. What attributes/characteristics does Elon Musk exhibit that make him an

4. What management style best describes Musks leadership? Why?

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